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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

In the midst of what has been a rather interesting several
weeks for housing finance reform Donald H. Layton published a column in Freddie
Mac's Executive Perspectives
blog. Layton, CEO of the government
sponsored enterprise wrote about his company's transition from what he termed "the
early-years conservatorship mindset" characterized by a hesitancy to make
decisions, by waiting for the government to tell it what to do or waiting for "imminent" legislation into being a
more aggressive company. He calls the
new Freddie Mac customer-focused and better at execution than ever before. "We're
firmly facing the future, not the past. And we're very much working not only to
have a better company but also a better housing finance system for all."

Layton said the company's Charter calls on it to keep the
mortgage market liquid, stable, and affordable and to be innovative in doing
it; to benefit families whether homeowners or renters. In the past the company's
approach to its affordability mission was focused mainly on meeting the "narrowly-defined"
affordable goals set by the government."
Now it views that mission as one for the community, covering classic
affordability as well as other things "like broad access to credit, foreclosure
alternatives (which hardly existed pre-2008), and other community-focused
priorities."

He cited as indicative of the community focus the company's entry into the
low-down payment field with its new 97 percent loan, a new partnership with
Quicken Loans to develop products aimed at low to moderate income borrowers,
first time homebuyers, and millennials and its increased lending in the
multifamily "workforce housing" sector.

Layton said when he became CEO he came with decades of experience in the
highly competitive banking world only to find the genteel competition of the
GSE duopoly. But today the company has dramatically increased its competitiveness,
close to doubling its rating for that quality on a recent consumer survey, and
it intends to keep working on improving it.

The company has also begun to focus on business outside of its former small
number of large lenders. Before 2008
only 16 percent of its single-family volume came from lenders outside the top
10. Now about 50 percent comes from
middle-and smaller sized companies after Freddie Mac added sales people and
newer service models.

Layton said the company is also focused on making the system better for
taxpayers; treating their exposure with great respect through credit risk
transfer which is no longer a pilot project but integrated into the entire
business model.

He concluded by saying that the company has come further in the last few
years than perhaps in the previous decade but it is not resting on its laurels. Rather it is determined to get better as a
company and, with its regulator and conservator the Federal Housing Finance
Agency (FHFA) taking the lead, on making the entire housing finance system
better.

Taken at face value Layton's column is merely an update, a bit of corporate
PR, maybe a shot of encouragement for a company that has lived with indecision since
2008. However, against the background other
things that have been going on, largely unnoticed by mainstream media over the
last two weeks something about it feels like more than casual boosterism. Here is a bit of a tick tock.

On October 12 the New York Post
reported that the White House was seeking to end the conservatorship under
which Freddie Mac and the other GSE Fannie Mae has operated since 2008. With no hope for any comprehensive GSE reform
in the current congress the Post said
the Administration was working behind the scenes to get something resolved
before President Obama's term ends. The push was supposedly happening out of a
fear that, should a Republican president be elected next year, he or she would wind
down the GSEs and kill the affordable housing mandate.

In the meantime, the GSEs shareholders, largely hedge funds who bought the
stock at fire sale prices after the companies were placed in conservatorship,
have recently changed tactics after their lawsuits against the federal
government contesting a revision in the original conservatorship agreement have
gone nowhere in court. Now, along with
housing advocates, they have undertaken a lobbying effort
to persuade the administration to recapitalize and release the two GSEs from
conservatorship. One hedge fund manager Bill Ackman, told Bloomberg News that it's clear Fannie
Mae and Freddie Mac are here to stay so it makes sense that the government
needs a plan to deal with them going forward. In the meantime proposals to reform the
housing finance system remain, as ever, stalled in Congress.

We would imagine that both the Post article and
the renewed efforts to return the GSEs to private control may have stoked a
few hopes among the Fannie Mae and Freddie Mac staffs. If so, it didn't last long.

On Monday, Michael Stegman, described as a top White House advisor on policy
matters, spoke to the Mortgage Bankers Association's annual convention and made
it clear that despite the lobbying the so called "recap
and release" proposal ain't going to happen.

The Administration, he said in prepared remarks,
believes that recapitalizing the GSEs with taxpayer funds and administratively
or legislatively releasing them from conservatorship with a business model that
conflicts with their public mission would be both an exercise of bad policy
judgment and poor stewardship of the taxpayers interest, willfully recreating
the very system that brought the nation so much harm.

As Stegman's remarks were closed to the public
the White House made sure the message got out, doubling down with an editorial
in Bloomberg View written by Antonio Weiss a counselor to Treasury Secretary Jacob J. Lew.
Weiss called recap and release misguided and said it was not true that
homeowners and taxpayers would benefit from the proposal.

First he said, it would do nothing to increase access
to the housing market. Releasing the
GSEs from conservatorship would subject them to the same investor pressures
that got them into trouble in the first place and there is no evidence that the
plan would expand access to credit for homeowners or create more affordable
rental units.

Contrary
to investor claims, taxpayers have not been fully repaid for the risks they
took in rescuing the GSEs he said. No
private investor was willing to step in and help them and the crisis that
followed caused immense harm to American households. Taxpayers have now received more in total
dividends than the draws given to the GSEs but the dividends alone aren't
adequate compensation for the extraordinary risk taxpayers took on and continue
to bear. The "repayment" argument also conveniently ignores that the $258 billion
commitment of Treasury support continues to GSE operations and allows them to
borrow at highly favorable rates.

Just
allowing the GSEs to retain their earnings would not come close to
recapitalizing them as some have suggested, he continued. A recent analysis from Moody's and the Urban
Institute made clear that it could take decades for Fannie and Freddie to build
safe and sound levels of capital and that recap and release would ultimately
drive up the cost of mortgages.

He
concluded that it is time for the housing finance reform and that private
capital should take most of the risk, limiting taxpayer exposure to an
explicit, appropriately priced guarantee against catastrophic risk. These goals, and a responsible end to conservatorship,
can be achieved only through comprehensive legislation.

The
timing of Layton's column indicates it was intended as a bit of a counterpoint the
Stegman and Weiss's remarks. Or maybe it
was long-planned as a pitch to policymakers not to overlook Freddie Mac's reformation
as the system itself it reformed. It
could be also that, faced with near certitude of limbo continuing for at least
another 15 months Layton just decided it was time to work on corporate morale.

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